Rhode Island Enacts Payroll Card Law

Rhode Island Governor Gina M. Raimondo has signed into law a bill that permits employers to pay employees by payroll card in addition to other currently available methods of wage payment. The new law provides clarity for both Rhode Island employees and employers regarding compliant payroll card practices. Public Law 2015-267 became effective upon the Governor's signature on July 15, 2015.

The law amends current provisions addressing payment of wages to include payment by payroll card. A payroll card account is defined as an account that:

Is either directly or indirectly established by an employer and to which transfers of an employee's compensation (i.e., salary, wages or other compensation) are made; and

Carries the federal consumer protections that apply to payroll cards.

If a Rhode Island employer pays wages to an employee by credit to a payroll card account:

The employee must be able to make at least one withdrawal (up to and including the full amount of the employee's net wages), free of charge, from the payroll card account in each pay period;

If the employee's wages are paid more frequently than weekly, the employee must be allowed to make at least one withdrawal (up to and including the full amount of the employee's net wages for that week) each week free of charge; and

The employees who receive wages by payroll card must be provided with a means of checking their account balances, either through an automated system or online. The inquiries must be without cost regardless of the number of inquiries that are made.

Federal law also applies to payroll cards and is incorporated by reference in the new Rhode Island law. Specifically, the Electronic Fund Transfer Act (EFTA) and Regulation E, which implements the EFTA, contain protections for employees. Under Regulation E (29 CFR Part 1005):

An employee must consent to receive wages by payroll card;

Fees related to electronic fund transfers (EFTs) or for the right to make such transfers must be disclosed at account opening or before the first transfer. The disclosure must be in clear, understandable language, in writing and in a form the employee may keep;

An employee must be provided periodic statements that detail account history;

Limited liability applies for unauthorized transfers or fraudulent transactions; and

Financial institutions must respond to an employee's report of errors within a specified timeframe.

Regulation E explicitly applies to accounts operated or managed by:

An employer;

A third-party payroll processor;

A depository institution; or

Any other person.

The Consumer Finance Protection Bureau (CFPB) is authorized to enforce the EFTA and Regulation E against any person subject to the provisions, including financial institutions and employers.

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